[Henry] Paulson says the department plans to expand its efforts to ease the credit crunch, but his strategy for the remaining $400 billion or so in TARP may not do the trick either. In particular, we’re skeptical of Paulson’s plans to invest in credit-supplying institutions that aren’t banks — for example, giant insurance company American International Group received a $40-billion investment from TARP — and to address problems in more types of debt markets, including credit card and student-loan debt. As the Center for American Progress points out, the biggest issuers of credit card debt are bank holding companies that have already dined at the TARP trough. And the U.S. Department of Education has already agreed to provide a secondary market for student loans.
The most welcome change that Paulson promised was to use a portion of TARP to avert foreclosures in some unspecified way. That effort may prove to be as weak as the administration’s other initiatives to help homeowners, but at least it’s aimed at the root of the credit crisis.